House bill would protect KC-46 contract funding

Mar. 12, 2013 - 06:45PM
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WASHINGTON — A U.S. House-developed federal spending measure that would fund the federal government for the remainder of the year would protect the Air Force’s much-watched aerial refueling tanker program.

The service would not need to modify its fixed-price development contract with KC-46-maker Boeing if the Senate passes the appropriations measure passed by the House last week, Lt. Gen. Charles Davis, the Air Force military deputy for acquisition, said Tuesday at a conference sponsored by Credit Suisse and McAleese and Associates in Washington.

The Air Force had about $870 million for KC-46 development in its 2012 budget. It requested $1.8 billion for the program in 2013. Since the Pentagon is operating under a continuing resolution, funding is frozen at 2012 spending levels.

While lawmakers have put forward a 2013 defense appropriations bill, it does not eliminate mandatory budget cuts, know as sequestration. Those cuts total about $46 billion in 2013.

“The bill that passed does not mitigate anything related to sequestration … it’s just there is some specific numbers,” Davis said.

“At least our program managers and our folks would baseline we’re operating under,” Davis said. “Once you give them just one data point in the equation, they can do some very miraculous things on a case-by-case basis, but they need to know what that data point is.”

Since the tanker is a fixed-price contract, the Air Force would likely “protect the tanker no matter what,” Davis said. That could mean reducing F-35 joint strike fighter buys.

Sequestration impact in 2014

Sequestration, particularly in 2013, would have a major impact on DoD’s day-to-day operations. Military personnel accounts are the only ones not subject to sequestration.

The Pentagon had been spending money normally throughout the majority of the past five months, thinking lawmakers would spare the military from sequestration-level cuts. However, on March 1 sequestration was triggered.

Since then, the Pentagon has announced it would stop training all Army units, except those preparing to deploy to Afghanistan. The Navy is standing down four wings and the Air Force is curtailing training for non-deployed squadrons. DoD is also planning to furlough civilian workers.

Deputy Defense Secretary Ashton Carter, speaking a the same conference, said the cuts will cause a spike in program inefficiency, by stretching out and driving up unit costs of systems across the Pentagon’s 2,500 investment programs.

DoD plans to fully fund operations in Afghanistan, meaning other accounts will be hit harder by sequestration. Last week, Pentagon Comptroller Robert Hale said the Pentagon is expecting a $35 billion shortfall in operations and maintenance funding in 2013 due to a more rapid pace of operations and the increased cost of getting equipment in and out Afghanistan.

The funding measure passed by the House last week adds about $10 billion for operations.

If sequestration remains in place over the next 10 years, DoD would be forced to cut about $50 billion per year from current planned spending levels. But unlike 2013 where DoD must cut about 10 percent from each spending account, in 2014 and beyond, it could choose areas to cut as long as it meets a top line budget cap.

The options being publicly discussed to find sequestration savings painlessly simply won't work, said Christine Fox, director of the Cost Assessment Program and Evaluation at DoD.

Reductions to military pay or cuts to benefits haven't been approved by Congress, closing bases hasn't been approved and takes too long to see real savings, and DoD has been looking for efficiencies for years and can't easily wring large sums of money out of its infrastructure, she said.

“In order to make the immediate $50 billion per year cuts, we're going to have no choice but to gut modernization,” Fox said. “The only place to get immediate savings quickly as we bring the force down responsibly is to cut acquisition programs.

Over the longer term, Fox said, changing the force structure will be necessary. “I believe that we're going to have to begin to reduce force structure immediately and significantly,” she said.

Still the 2014 budget proposal developed by DoD over the last year does not take sequestration into account.

“The ’14 budget submission is not going to have $50 billion cuts reflected in it,” Carter said. “That’s not what we expect we will have, certainly not what we want to have. We’ll have to later adjust the ’14 budget there’s no question about it.”

If the sequestration budget cuts continue, we would need to consider shrinking the size of its civilian workforce and further cuts to the size of the military, Carter said.